MKGRA020O AM Newsletter Asia June 2010 (AW) LR

8/7/2019 MKGRA020O AM Newsletter Asia June 2010 (AW) LR

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Analysys Mason in the

AsiaPacific region

Analysys Mason has been active in the

AsiaPacific region for more than ten years, well

before we established an office here in

Singapore in 2006. We recently moved to a new

office in Robinson Centre, in the heart of

Singapores Central Business District near

Raffles Place and the newly developed Marina

Bay Financial Centre.

Analysys Mason has worked in virtually every

country in the AsiaPacific region. Over the last

ten years we have worked with most of the

telcos, regulators, financial institutions and media

companies in the region. Our work includes

assisting clients to win licences in the early years,

helping them launch their businesses and then

supporting their commercial strategy and

operations as their markets face increased

competition and consolidation. We have also

assisted regulators to develop and implement

far-reaching policies and regulations, and havesupported financial institutions and private

equities firms in major transactions. In short, we

work with players in the industry to solve their

most pressing issues by formulating practical

strategies and plans that transform their

businesses and improve their operations.

Some of the notable work undertaken by our

Singapore team recently, with support from experts

in our other offices around the world, includes:

Developing a data strategy for a regional

mobile operator

Assisting a pure-play mobile operator with its

transformation into a triple-play operator

Developing a framework for the national

broadband network for a major regulator, and

also assisting two other regional regulators in

the development of national broadband plans

Working with a pay-TV operator on a series of

issues such as content strategy, churn

management and channel optimisation

Communiqu

www.analysysmason.com

Contents

2 Analysys Mason in India

Mobile banking will the banks

lead the next wave?

3 Exploiting the digital dividend: a

unique opportunity for AsiaPacific

4 Improving revenue yield and

reducing network costs for mobile

broadband

5 Retention and growth in emerging

mobile markets: what are the

options?

6 Interesting M&A opportunities in

AsiaPacific

7 Defining an approach to national

broadband policy

8 About Analysys Mason

Asia Edition June 2010

Written by Yang-Soon Lee

Partner

Consulting Division


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Advising a regulator on a series of engagements

covering spectrum trading and auctions

Supporting several financial institutions and

private equity firms on transactions such as

the privatisation of a publicly listed company,

acquisition of towers, telecoms and cablecompanies and funding of network expansion

Conducting a thorough network audit for a

major operator following a significant outage.

The AsiaPacific team in Singapore is led by Yang-

Soon Lee and Amrish Kacker. Both are Partners at

Analysys Mason, with extensive consulting

experience in the telecoms and media industries,both globally and within the region. The office is

supported by a team of equally experienced Senior

Managers and Consultants, most of whom have

postgraduate degrees from major universities such

as Columbia, INSEAD, Oxford, Cambridge and LSE.

For more information, please contact

Yang-Soon Lee, Partner, [email protected]

Analysys Mason in the AsiaPacific region continued

Analysys Mason established its presence in

India through acquisition of BDA Connects

India Operations in April 2010. BDA

Connect India was founded in 2006 with a

focus on providing consulting and investment

advisory services to clients across the

telecoms, media and technology (TMT)

value chain in India.

Based in New Delhi, the Analysys Mason India

team consists of 15 professionals with

significant experience in strategy consulting in

telecoms and technology. The team has been

working closely with telecoms operators,

original equipment manufacturers (OEMs) and

value-added service (VAS) companies on

market entry and growth strategy, and has

advised public organisations such as the

Federation of Indian Chambers of Commerce

and Industry (FICCI) and the Confederation of

Indian Industry.

Some of the notable work undertaken recently

by our India team includes:

Due diligence relating to an investment of

USD300 million in a wireless broadband provider

Advising a leading technology OEM on

regional acquisition opportunities in the

m-commerce business

Developing a business plan for a licence bid

application, on behalf of a large international

telco

Developing a three-year business plan and

market entry strategy for the Indian VAS

business of a large Japanese and European

conglomerate

Developing a mobile store pricing strategy for

a large handset OEM in India

Developing a thought leadership report on

3G and BWA: The Next Frontier, Business

Models, Projections and Imperatives, in

partnership with FICCI.

Analysys Masons India office is led by Kunal

Bajaj and Pankaj Agrawal. Both have extensive

consulting, regulatory and operating experience

in the TMT industries in India. The office is

supported by a team of consultants and

analysts, many of whom have degrees frommajor universities such as University of

Pennsylvania (Wharton), Indian Institute of

Management, Indian Institute of Technology,

Tohoku University and ESCP-Europe.


Kunal Bajaj, Partner, at

[email protected]

Written by Kunal BajajPartner

Consulting Division

Analysys Mason in India

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Ever since operators such as M-Pesa, Globe

Telecom and Smart started having some

measure of success in the mobile money

transfer business, banks have been asking

themselves whether they too have what it

takes to deliver a mobile banking proposition to

their customers or whether they are limited

simply to offering mobile-optimised portals.

Mobile money transfers have been particularly

successful in Asia where there are relatively high

wireless penetration levels, coupled with low

levels of access to financial services especially

in developed markets, as shown in Figure 1.

Banks, however, need to be aware that while

targeting the unbanked does provideopportunities, there are significant challenges

to be overcome. Figure 1 shows eight key

observations Analysys Mason has made in the

course of working on mobile banking projects.

Written by James Ong

Manager

Consulting Division

Mobile banking will the banks lead the

next wave?


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Improving revenue yield and reducing network costs for mobile broadband continued

Revenue yields for dongles have declined

by 48% in the last year, and by 36%

for handsets.

Growing demand will dramatically increase

investment requirements

The rising take-up of mobile broadband will

require significant capex and opex in the coming

years we estimate that delivering a mobile

broadband experience to 20% of the subscriber

base would double the NPV of cash outflows.

A big driver for the increase in cash outflows

will be the need to improve backhaul and

transmission, which will account for up to one

third of the NPV of cash outflows (in an

illustrative business case).

Given that the revenue yield on mobile

broadband is likely to be extremely low, there

remain significant concerns about whether a

profitable business model exists.

Delivering better revenue yields and cost

reduction measures are fundamental to

future profits

Tackling the challenges in building a profitable

mobile broadband business will require adisciplined and systematic approach to

improving revenue yield, as well as more

effective reduction of network costs (see

Figure 3 opposite). The key initiative to improve

revenue yield is pricing that focuses on creating

profitable subscriber segments. The major

network initiatives under evaluation by

operators in the region are peak traffic

offload (e.g. using WiFi or femtocells) and

backhaul optimisation.

Analysys Mason works with mobile

operators on commercial and technical

initiatives to support the development of a

profitable mobile broadband business.

For more details on the various initiatives

and an overview of our capabilities in this

area, please contact Amrish Kacker, Partner,

at [email protected]

Figure 3: Network initiatives to improve profits from mobile broadband (illustrative) [Source: Analysys Mason projects]

Operators in fast-growing emerging markets are

under constant pressure to balance market

share expansion with profitability. While there is

an expectation that they will expand their

subscriber share continuously, their high-ARPU

and high-profitability user base is under

sustained attack from new entrants as well as

existing competitors. This threat is especially

severe because of the concentration of the user

base and profit pools: in emerging markets,

such as India, the top 9% of subscribers are

estimated to contribute about 29% of revenues

and 45% of EBITDA margins, as shown in

Figure 4.

Therefore, critical issues for operators in such

emerging markets include:

retaining high-end subscribers, especially

following the introduction of changes such as

mobile number portability

increasing revenue from mid-end subscribers

by up-selling and cross-selling services, and

optimising tariff plans.

Written by Pankaj Agrawal

Associate Director

Consulting Division

Retention and growth in emerging mobile

markets: what are the options?

Figure 4: Revenue and margin shares in the subscriber base for a case study in India [Source: Analysys Mason]

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Retention and growth in emerging mobile markets: what are the options? continued

However, traditional retention mechanisms and

revenue enhancement have had limited success.

To reduce churn, operators in emerging

markets, such as India, have been working with

data warehousing and business intelligence

models. At an implementation level, initiatives

include minor service enhancements, such as

occasional personalised gifts and co-branded

rewards programmes. However, the success of

these initiatives will be tested significantly once

mobile number portability is introduced.

Competitive offers from new entrants are

expected to include bundles of smartphones

and value-added services, along with committed

customer care and empty networks, which

could very well be a strong incentive to churn.

On the revenue growth front, operators have long

searched for a killer application to drive non-voice

revenues. However, with the exception of a few

markets, such applications and services have been

elusive. As a result, operators are now focusing on

increasing the penetration of simple non-voice

services, such as caller tunes, by offering flexible

billing options and improved service discovery.

Stickiness remains a challenge though, with

customer churn rates on some value-addedservices reported to be as high as 30% per month.

So what can be done to address these two

important issues of retention and revenue

growth? With 3G addressing access network

quality and speed, the relevance of service as

well as multi-screen integration could help

significantly in increasing incremental revenue and

reducing churn. Operators deploying search and

discovery platforms, which provide

recommendations and relevant content based on

subscriber profiles and usage patterns, can help

drive content consumption, user engagement,

conversion rates and advertising revenues across

multiple screens. Some of these platforms have

already reported an increase of 3040% in value-

added service revenues for operators. With the

introduction of high-speed access networks,

multi-screen experiences and relevance could

very well be the killer applications that operatorshave been searching for to increase both ARPU

and stickiness in emerging markets.

Analysys Mason works with mobile operators on

customer retention, service pricing frameworks

and contact centre initiatives to help enhance

revenue growth and customer retention.

For more information on our capabilities

in developing business strategies for

convergence and multi-screen models,

please contact Pankaj Agrawal,

Associate Director, at

[email protected]

AsiaPacific is seeing a reawakening of M&A

activities in telecoms, media and technology

(TMT). Previous transactions that stalled during

the financial crisis are likely to resume, and

new opportunities are arising as a result of new

technology and market developments (as

illustrated in Figure 5 opposite).

We see a number of key trends relating to M&A

activity in the TMT space:

increasing convergence across mobile and

media

integration and divestment of players across

the value chain

consolidation in fragmented markets

tower portfolio divestment and consolidation

restructuring plays in Hong Kong.

Convergence across mobile and media had

previously seemed a distant dream, but now

appears much more likely to happen. Mobile

operators in the region are getting into the

broadband and media game. As a result, any

second telecoms player will want, or need, to

have a presence in broadband and media.

KDDI, Taiwan Mobile, SKT, Maxis and Indosat

are just some examples of players that are

expanding their activities in this way. New

products and services such as wireless

broadband, IPTV and mobile TV are gaining

some credibility among users, and take-up is

increasing. As a result, operators that do not

have a convergent offering or infrastructure are

increasingly finding themselves at a disadvantage

and so will need to make acquisitions.

Players are adopting increasingly polarised

approaches to the value chain. Some players

prefer to focus on their core competency by

providing services rather than deploying

networks. For this reason, they are divesting

their tower activities and outsourcing the

network. In contrast, other players are beginning

to establish integrated operations that span the

whole value chain (for example, by acquiring ICT

system integrators and even banks, to serve

enterprises and consumers respectively). In pay

TV, some broadcasters are extending their

activities upstream (e.g. by buying into content

production) and downstream (e.g. by acquiring

set-top box manufacturers).

Consolidation of fragmented markets is a

development that we believe is likely to occur.

For example, a three-player mobile market

appears to be the most sustainable in the long

run. Despite more than a decade of

competition in most markets, the bulk of

mobile subscribers and revenues belong to the

top three players. The fourth player in most

markets has either struggled or has margins

that are significantly lower than those of the

third player. The valuation gap between

potential buyers and sellers has been

narrowing, and this could well lead to

consolidation in the more fragmented

AsiaPacific markets (including India, Indonesia

and Pakistan).

Pay TV is another market where consolidation

could occur. With the increasing deployment of

IPTV and stronger enforcement of anti-piracy

measures, smaller pay-TV broadcasters (some

of which may currently be pirate broadcasters)

will need to increase their scale in order to

compete effectively, particularly since the cost

of content could be quite prohibitive. We

expect that markets such as Thailand,

Indonesia, India and South Korea will see

some consolidation activity in the pay-TV

sector within the next few quarters.

Written by Lim Chuan Wei

Senior Manager

Consulting Division

Interesting M&A opportunities in AsiaPacific

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The towers market will only grow if data trafficincreases and new technologies are deployed.

Evidence of increasing activity in this area can

be seen in India, where three tower

transactions were announced between January

and February 2010 alone. In Indonesia, there

are plans to allow foreign investment into

towers infrastructure. As a result, Telkom has

ambitious plans to spin off the towers inTelkomsel and Telkom to a separate business

unit and potentially to acquire the towers

business of its competitor Indosat.

Finally, Hong Kong stands out as an interesting

source of buyout opportunities. For example,

companies such as TVB and PCCW are

fundamentally sound and could find their

businesses rejuvenated by the involvement of a

new investor.

Analysys Mason has extensive expertise in

identifying and evaluating investment and

financing opportunities within the TMT sector.

During the last decade, our consultants have

gained in-depth experience of working with

operators, broadcasters and vendors in the

region, to understand their market opportunities

and challenges, and operational issues. We

have in-house technical consultants whose

knowledge of the underlying technologies is

second to none. Last, but not least, we

understand the needs of clients, having worked

extensively with financial institutions on

investments in the AsiaPacific region ranging in

value from USD10 million to USD1 billion. We

have been involved in one capacity or another

in many of the major transactions that have

occurred during the past few years.


Lim Chuan Wei, Senior Manager, at

[email protected]

Figure 5: Assessment of opportunities in AsiaPacific by sector [Source: Analysys Mason]

Interesting M&A opportunities in AsiaPacific continued

Numerous studies from bodies such as theWorld Bank have established that access to

broadband services can provide both economic

and societal benefits, and there is now no

question that broadband services drive growth

and productivity in a market. As such, interest

among public policy makers in promoting the

availability of broadband networks and

especially high-speed broadband networks

has grown considerably both globally and in the

AsiaPacific region. In particular, several

governments in the AsiaPacific have chosen to

intervene in a number of markets, with the most

high profile of these interventions focusing on

the deployment of infrastructure. For example,

the public sector has invested in, or has

announced plans to invest in, the roll-out of

high-speed broadband networks in Australia,

Malaysia, New Zealand and Singapore.

Other policy makers and national regulatory

authorities may be tempted to follow this trend

and invest in the roll-out of similar infrastructure

in their own markets, given the extensive

publicity afforded to these initiatives. However, it

is essential that they have a sufficient

understanding of the supply- and demand-side

barriers facing the development of the

broadband market, as well as the effect of these

barriers on the future evolution of the market.

These barriers could include:

on the supply side limitations or bottlenecks

across any part of the network (local access,

backhaul, core or international networks), orthe unavailability of suitable spectrum for

wireless broadband services such as WiMAX

or HSPA

on the demand side high prices for

broadband access or PCs, lack of coverage

leading to constrained demand, lack of locally

relevant content and applications to

encourage broadband usage, or lack of

education on the benefits of IT and

broadband among individual users and

businesses.

Based on the identified barriers, a range of

interventions or action areas can be defined, as

illustrated in Figure 6 overleaf, to drive the

achievement of overarching policy objectives for

the broadband market. For example, in

developing markets, it is important to balance

the need for access to some form of broadband

services in more rural areas against the desire

for high-speed, or next-generation, broadband

services in dense urban areas. This issue can

also arise in more developed markets, where

basic broadband access is widely available but

higher-speed services are only available in

limited areas, raising concerns over the

Written by Paul Sumner

Senior Manager

Consulting Division

Defining an approach to national broadband

policy

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Figure 6: Key factors and example actions in developing a national broadband plan [Source: Analysys Mason]

About Analysys Mason

Analysys Mason is a trusted adviser on telecoms, technology and media.

We work with our clients, including operators, regulators and end users, to:

design winning strategies that deliver measurable results; make informed

decisions based on market intelligence and analytical rigour; develop

innovative propositions to gain competitive advantage; and implement

operational solutions to improve business efficiency.

With 250 staff in 12 offices, we are respected worldwide for our exceptional

quality of work, independence and flexibility in responding to client needs. For

nearly 25 years, we have been helping clients in more than 100 countries to

maximise their opportunities.

Contact us

Europe & Africa: Head office, London +44 20 7395 9000

Middle East: Regional headquarters, Dubai +971 4 211 5494

The Americas: Regional headquarters, Washington DC +1 202 331 3080

AsiaPacific: Regional headquarters, Singapore +65 6493 6038

South Asia: Regional headquarters, New Delhi +91 11 4700 3100

Email: [email protected]

www analysysmason com

emergence of a new digital divide.

Finally, once the interventions or action areas

have been defined, they should be assessed in

terms of any interdependencies or synergies

that could be achieved in their implementation,

as well as their impact, and the duration of the

impact, on the market. Furthermore,

consideration needs to be given to the

expected implementation cost and timeline for

these actions. Once this assessment is

complete, it is possible to prepare a

comprehensive national broadband plan based

around these action areas, which will support

the development of a vibrant, competitive and

sustainable broadband sector. This plan should

be a dynamic document one that is

constantly reviewed and refined based on the

evolving landscape to ensure that it

encourages the sectors development in the

most effective manner.

Analysys Mason has an unrivalled track record

of assisting regulators and policy makers in

developing broadband initiatives around the

world and within the AsiaPacific region. We

have been at the forefront of both the design

and the implementation of public-sector

interventions in broadband, including

programmes involving next-generation super-

fast broadband access. In the AsiaPacific

region, we recently assisted AITI in Brunei

Darussalam in the development of a

broadband strategy and have also advised two

other regional regulators on the development of

their national broadband plans. We also

assisted the IDA in Singapore during theconceptual design phase of the countrys Next

Generation National Broadband Network.

For more information about our

capabilities in developing national

broadband plans, please contact

Paul Sumner, Senior Manager, at

[email protected]

Defining an approach to national broadband policy continued

MKGRA020O AM Newsletter Asia June 2010 (AW) LR

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Transcript of MKGRA020O AM Newsletter Asia June 2010 (AW) LR